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How to Improve Your Strategic Sourcing Events

Posted - April 19, 2016

How to Improve Your Strategic Sourcing Events

These days, sourcing has become a common discipline in supply chain and transportation management. There is an organizational expectation that transportation modes will be sourced and cost will be taken out of the network with some regularity. However, meeting these expectations while maintaining service year-over-year has become more challenging. To get more out of the market, we need to change the approach, as it is no longer enough to simply conduct a “bid” for transportation capacity. While price is important, a sourcing exercise has to be done within the context of solution and should meet operating goals. What’s the optimum solution of a sourcing event? It’s a blend of the best match of service, capacity and rate.

Examine Your Process

When it comes to strategic sourcing, shippers are leaving money on the table due to inefficient and outdated sourcing processes. If you describe what you want to buy poorly, it’s going to be hard for a seller to sell you what you want to buy. Same goes for shippers who need to have a process for sourcing that strikes the right balance between being viable, legal, etc. and includes expressive competition. If a shipper puts out a Request for Proposal (RFP), it should include everything they want to buy off on.

By including expressive competition in your sourcing process, shippers will benefit from evaluating the strongest players. Shippers: Ask sellers to incent you to buy from them, express this through price and service. Your RFP should be explicit and detailed with what you want to buy. If you don’t take the time and just go with low cost provider, you’ll most likely end up with a 6 month plan. Then 6 months later, you’ll be going through the same process again.

With a finer-detailed, all-encompassing RFP, a sourcing event will yield a population of suppliers to meet those needs (not all, but most or some of your needs), which allows you to run scenarios of the cost in total of everything. Then you can use business rules to constrain the solution and therefore pick the best supplier from a group that has broader and deeper capabilities to meet your needs.

5 Characteristics That Drive Better Sourcing Outcomes

Sourcing professionals have to continuously push the limits of data, technology and the decision-making process to find and deliver value. There are five important characteristics to improve upon in order to continuously drive positive sourcing outcomes:

  • Scale
  • Transparency
  • Flexibility
  • Accuracy
  • Speed (time to value)

In today’s environment, it is not enough to embrace two or three of these characteristics. These qualities are interdependent and you need them all to get the best out of the market and collaborate effectively with your supply chain partners and internal stakeholders. Granted, leveraging these attributes requires organizational alignment, data, technology and efficient decision processes, but when they are all present, we can capitalize on sourcing potential. The bottom line is that strategic sourcing is a complicated process that requires a new perspective, a review of existing processes and improvement each time it is done. One cannot expect to get a different and better result using the same approach repeatedly. We have to look at the sourcing challenge a little differently each time to improve upon it. Evaluating these characteristics of the sourcing process and improving upon them creates both opportunity and value.

Has your latest strategic sourcing outcome met expectation? Why or why not? Tell us in the comments below.